United States Vs. National Exchange Bank - Court Judgment

LegalCrystal Citation

legalcrystal.com/94560

Court

US Supreme Court

Decided On

Apr-12-1926

Case Number

270 U.S. 527

Appellant

United States

Respondent

National Exchange Bank

Excerpt:.....and received the amount of the altered check. that bank endorsed it: "pay to the order of any bank, banker, or trust company. all prior endorsements guaranteed, june 3, 1922," negotiated it to the defendant, and received the same amount. the defendant endorsed the check, "received payment through the baltimore clearing house, endorsements guaranteed, june 5th, 1922," delivered it to and received the same amount from the baltimore branch of the federal reserve bank of richmond, the agent of the plaintiff, which forwarded the check to the treasurer of the united states and was given credit for $4,750. the baltimore branch had no notice of the fraudulent change.
the government argues that acceptance or payment of a draft or check, although it vouches for the signature of the.....

Judgment:

United States v. National Exchange Bank - 270 U.S. 527 (1926)
U.S. Supreme Court
United States v. National Exchange Bank, 270 U.S. 527 (1926)

United States v. National Exchange Bank of Baltimore

No. 222

Argued March 16, 1926

Decided April 12, 1926

270 U.S. 527

ERROR TO THE CIRCUIT COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Syllabus

1. A drawee of a check or draft who is also the drawer is held, in paying it, to a knowledge of the true amount, and if, by mistake,

he pay to a
bona fide
holder for value without notice a larger amount to which the paper has been fraudulently raised, he cannot recover the difference from such holder. P.
270 U. S. 533
.

2. This rule is applicable to the United States.

So
held
where a check was drawn on the Treasurer of the United States by a disbursing clerk of the Veterans' Bureau, raised and negotiated by the payee, and in due course taken and paid for at its fraudulent face by the defendant bank, which collected the same amount from the United States.

1 F.2d 888 affirmed.

Error to a judgment of the circuit court of appeals affirming a judgment for the bank in an action by the United States to recover the difference between the amount to which a check paid by it had been fraudulently raised and the amount for which it was drawn.

This is a suit brought by the United States to recover the difference between the amount to which a check paid by it had been fraudulently raised and the amount for which the check was drawn. The case was heard upon a demurrer to the declaration, and the judgment was for the defendant both in the district court and in the circuit court of appeals. 1 F.2d 888. The facts alleged are as follows: a disbursing clerk drew a United States Veterans' Bureau check upon the Treasurer of the United States in favor of one Beck, for $47.50. After it was issued, the check was changed so as to call for $4,750. Beck endorsed it to a bank of South Carolina and received the amount of the altered check. That bank endorsed it: "Pay to the order of Any Bank, Banker, or Trust Company. All prior endorsements guaranteed, June 3, 1922," negotiated it to the defendant, and received the same amount. The defendant endorsed the check, "Received Payment Through the Baltimore Clearing House, Endorsements Guaranteed, June 5th, 1922," delivered it to and received the same amount from the Baltimore Branch of the Federal Reserve Bank of Richmond, the agent of the plaintiff, which forwarded the check to the Treasurer of the United States and was given credit for $4,750. The Baltimore Branch had no notice of the fraudulent change.

The government argues that acceptance or payment of a draft or check, although it vouches for the signature of the drawer, does not vouch for the body of the instrument,
Espy v. First National Bank of Cincinnati,
18 Wall. 604; that this rule is not changed by § 62 of the Uniform Negotiable Instruments Law; Article 13, § 81, Maryland Code of Public General Laws: "The acceptor, by accepting the instrument, engages that he will pay it according to the tenor of his acceptance;" that the drawer and

drawee of the check were not the same in such sense as to charge the drawee with knowledge of the amount of the check, and that therefore the United States can recover as for money paid under a mistake of fact. The defendant urges several considerations on the other side, but it is enough to say that the last step in the government's argument seems to us, as it did to the circuit court of appeals, unsound. If the drawer and the drawee are the same, the drawer cannot recover for an overpayment to an innocent payee, because he is bound to know his own checks.
Bank of United States v. Bank of Georgia,
10 Wheat. 333. In this case, there is no doubt that, in truth, the check was drawn by the United States upon itself.

The government attempts to escape from this conclusion by the fact that the hand that drew and the hand that was to pay were not the same, and some language of Chief Justice White as to what it is reasonable to require the government to know in paying out millions of pension claims. The number of the present check was 48218587.
United States v. National Exchange Bank,
214 U. S. 302
,
214 U. S. 317
. But the Chief Justice used that language only to fortify his conclusion that the United States could recover money paid upon a forged endorsement of a pension check. He cannot be understood to mean that great business houses are held to less responsibility than small ones. The United States does business on business terms.
Cooke v. United States,
91 U. S. 389
. It has been suggested that the ground of recovery for a judgment under a mistake of fact is that the fact supposed was the conventional basis or tacit condition of the transaction.
Dedham National Bank v. Everett National Bank,
177 Mass. 392, 395. If this be true, then when the United States issues an order upon itself, it has notice of the amount, and when it comes to pay to an innocent holder making a claim as of right, it is at arm's length, and takes the risk. We are of opinion that the United States is